Proving Dissipation of Assets in a New Jersey Divorce

When two people choose to divorce, one of the foundational questions to answer is who gets what. That might sound simple on the surface, but it rarely is. The longer a couple is married, the more assets they have acquired, the more cumbersome the process can be.

The legal philosophy followed in New Jersey and many other states is equitable distribution. Assets and debts acquired during the marriage are divided fairly, not necessarily equally, between the two parties. Unfortunately, distribution cannot be equitable or fair if one spouse purposely squanders money.

Poor Judgment vs Dissipation of Assets

First, it’s important to define dissipation. Merriam-Webster defines the term to mean a “wasteful expenditure” or an “act of self-indulgence.” With all apologies to the widely used dictionary, New Jersey courts define the term a little differently. Dissipation is when one spouse uses marital assets for an unreasonable expenditure that disenfranchises the other spouse at a time when the marriage was in serious jeopardy. Yes, divorce papers don’t necessarily have to be filed for possible dissipation to be at play.

Yet it’s important to understand that any decision that loses money isn’t de facto dissipation. A bad investment, a vacation, poor business decision, and a big purchase while the marriage was intact are probably not dissipation. Such financial stumbles may be bad judgment but aren’t necessarily dissipation.

A court looks at three factors when determining whether dissipation occurred:

1. When was the expenditure made relative to the divorce filing?
2. Was the expenditure typical or like others made during the marriage?
3. Did the expenditure benefit both spouses or only one?

The answers to the above questions help a judge determine how to classify an expenditure.

Here are some examples of potential dissipation:

• Your spouse buys an expensive convertible with the hopes that you’ll be stuck paying for half the monthly note.
• That business trip to New York was actually a lover’s getaway. Your spouse used marital funds on the hotel and expensive dinners.
• Your spouse wires half of the money in the savings account to their uncle days before you file.
• Your spouse liquidated marital assets to pay personal debts.

You can take action if your spouse wastes marital funds to which you have an equitable right.

Preventing Dissipation of Assets

Our neighbor New York automatically freezes accounts and assets once a spouse files a marital action (divorce, separation, annulment, etc.). In New Jersey, a temporary restraining order (TRO) is not an automatic component of a divorce filing. Instead, a spouse must request that the court issue a TRO on marital assets.

The TRO does not “freeze” accounts per se. Both parties can still pay their bills and make reasonable expenditures. But the order does put both spouses and their financial institutions on notice.

Another defense to dissipation is closing joint credit cards, home equity lines, and other joint accounts.

Consequences of Wasting Marital Assets

If your spouse squanders marital assets, you do have a right to seek recovery.

The court has immense flexibility to compensate the aggrieved spouse:

• Force the guilty spouse to pay higher spousal support payments
• Receive a greater share of the marital estate
• Assign the guilty spouse more responsibility to pay for the marital debt

In a New Jersey dissipation divorce case, the compensation does not have equal the amount dissipated. The judge can punish the offending ex by awarding substantially more to the other spouse.

Retain an Attorney with an Experienced Eye

At Lane & Lane, LLC, our 60 years of divorce law experience has taught us the tricks some spouses play. We know the warning signs of spouses attempting to hide assets, dissipate marital funds, or create distractions for their benefit. Just as importantly, we know what’s required to prove these misdeeds in court.

Decisions made during your divorce can reverberate for years to come. Strategic and insightful legal counsel is a must.